Module 14: Preparing Business Plans

14.2 What are the key components?

A business plan is actually a compilation of several sub-plans. A simplified business plan can be prepared within the municipality to consist of:

A title page and table of contents;
B executive summary and business profile;
C marketing plan;
D operations plan;
E human resources plan; and
F financial plan.

Preparing a business plan means developing a comprehensive set of operational activities arising from the strategic plans. It is an essential step in the preparation for PPPs to ensure that municipalities know: what the objectives are; how the PPP option will be managed; and how the PPP goals will be attained.

A. Title page and table of contents

The title page should include the name of the partnership, the period of time that the plan covers, the date that the plan was prepared as well as a contact person, phone number and address. The title page should look professional: it is the first page a reader sees and first impressions are important.

The table of contents lists the topics covered by the plan. As a road map, it allows the reader to jump immediately to those sections that are of most interest.

B. Executive summary and business profile

The purpose of the executive summary is to capture the highlights of the business plan and serve as a quick reference. The summary is usually completed after the remainder of the plan has been written and should preferably be about 1 or 2 pages long. It should include:

– a brief description of the service, potential customers and markets;

– purpose and concept of the partnership (or why the marketplace needs the services of the partnership);

– business targets (projections in terms of units and monetary volumes during the time period that the plan covers) and how it can be attained;

– required financing and sources, how the funds will be used and how the funds will be repaid; and

– linkages to the partnership’s strategic plan.

Along with this, a brief description of the partnership organisation and ownership should be provided. Other useful information includes management, previous financing (by whom), the proposed start-up date of operations, important details of the partnership's current market area, customers and trends that the proposed business can build upon.

C. Marketing plan

The marketing plan describes, in general terms: the industry in which the partnership intends to operate and the strategy to penetrate or develop the target market; how much is planned to be sold; who the customers are; how the services will be priced; and how the services will be promoted. A full marketing plan and strategy need not be included in the business plan but a number of alternatives need to be considered and evaluated in the planning process before the marketing plan is finalised.

There are various exercises that can be helpful in the planning process:

– SWOT analysis – strengths, weaknesses, opportunities and threats;

– PEST analysis – political, economic, social and technological;

– Balanced scorecard – analysis of the impact of achieving objectives from a financial perspective, a customer perspective and an internal perspective, and of innovation and learning, together with identification of critical success factors and performance measures; and

– Brainstorming – for alternative scenarios, opportunities and strategies.


The marketing plan must cover/include:

◊ evidence that the partnership is aware of market conditions (size and structure), the general economy and competition;

◊ the implications of change (or trends), new technologies, new products, different lifestyles, ability of customers to afford the service;

◊ the implications of legal or political constraints on how the services are produced and delivered;

◊ the competitive advantage of the particular service to be provided or if it fills a particular niche in the marketplace;

◊ the basis for pricing the service based on costs, the competition or what the market will bear;

◊ the geographic location in which the partnership will concentrate its promotions; and

◊ the best way to distribute the service to customers.

In formal terms, the marketing plan should address the four “P's” of marketing: product, price, promotion and place (distribution). It should also identify strategically where the partnership is at, where it wants to go, and how it will get there. A critical component will be a projection of sales. Where it is required to make forecasts, at least three sets of projections should be considered: "optimistic", "pessimistic", and "most likely" scenarios.

D. Operations plan

The operations plan is a brief outline of the basic operation of the PPP option. This may be obvious to some people, but not necessarily to every stakeholder. The following need consideration:

◊ how the service is to be provided;

◊ where the supplies and materials will be purchased and how the service is to be delivered;

◊ what after-sales service is required (repairs and so on);

◊ what land, buildings, facilities and equipment are required, including costs and financing (for lease or ownership), renovations, local taxes and utility costs;

◊ what employee and management plans are required, including how skilled labour can be accessed if required;

◊ the business location that is chosen and an explanation of why it should serve the partnership’s needs, proximity to customers, suppliers, transportation costs and location of competitors; and

◊ the production capacity, turnover rates or services that can be achieved realistically with the existing or proposed plan and staff.

E. Human resources plan

Management is critically important to the success of any PPP option. Investors or lenders are looking for a balanced team of people to cover the important areas of management, marketing, accounting and the technical skills to deliver on the business plan. Human resource management requires thinking about how the partnership will recruit, screen, motivate, train and discipline the staff needed to work. The human resources plan should cover/include the points below.

◊ It should name the key people operating the PPP option, and outline the education or experience each of them brings to it.

◊ It should explain how key areas of the operation are handled and by whom. An organisational chart may be useful in this regard. Contingency plans should be indicated if a key person cannot work for an extended period of time.

◊ It should indicate any weaknesses in the management team and the strategy to overcome them and in what time frame. Training existing staff, recruiting new employees or hiring outside advisors are some of the possibilities.

◊ It should indicate whether salary and compensation of managers and employees are competitive within the industry and whether incentives such as commissions, bonuses or profit sharing are being offered.

◊ It should name the board of directors or professional advisors and indicate how management will use their experience and guidance. The timing and frequency of board meetings should also be indicated.

Recognition of the contribution made by employees to an organisation is one key to the growth and success of a partnership. The plan should outline how the municipal management intends to identify, recruit or promote key people and maintain a strong sense of collective achievement with all employees.

F. Financial plan

The financial plan is a key component of the business plan. This is because the process of creating financial projections for the PPP option revenue and expenses, cash flow and financial position will force the team preparing the business plan to examine all of the other key components of the plan. In doing this, they will be able to describe their plan in monetary terms and detect any discrepancies, gaps or unrealistic assumptions made earlier. The financial plan is also a valuable tool for creditors or government agencies when evaluating the partnership’s needs and use of funds.

The financial plan consists of: an income statement; a cash flow summary; the balance sheet; capital sales and purchases; and a financing schedule.

Income statement

The purpose of the income statement is to disclose the annual revenues and expenses of a business over the period of time that the plan covers. For an existing business, information for at least the last one or two years is necessary.

Cash flow summary

Of all the supporting documents, the cash flow projection is one of the most difficult to prepare. Basically, it is an educated guess about when and how much money will be coming into and going out of partnership option. The cash flow forecast enables managers to decide what can be afforded, when it can be afforded and how the partnership will be kept operating on a month-to-month basis. This information is useful to indicate the projected increases or decreases of a bank loan that may be required during the year. Quarterly summaries are often adequate, but occasionally monthly summaries are required for the first year of operation.

The balance sheet

The balance sheet describes the assets, the liabilities and the equity of the partnership at a particular point in time. It is a widely used accounting statement that indicates the economic resources of the organisation and the claim on those resources by creditors. This information is useful in that it allows management and creditors to compare the partnership’s estimates, as well as its past performance, against industry averages.

Capital sales and purchases

Investors and lenders will require detailed information on the capital purchases that are anticipated during the planning period, as well as information on how these assets are to be financed and the expected useful life of the assets. Capital assets include land, buildings and equipment.

Financing schedule

The financing schedule or loan summary should provide the reader with a snapshot view of existing and new loans that will be held by the partnership. Information should outline the interest rate being paid, frequency of payments, security given, type of loan (amortised versus non-amortised) and the expected term of the loan. For existing loans, the name of the financial institution should be indicated.

No one expects a new partnership to make a profit in the first month, quarter or in some cases year. However, there should be light at the end of the tunnel. Interest on loans is repayable from the first day of operation, and the partnership must show a return on the investment, in terms of both time and money, within a realistic time frame if it is to be viable.

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